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Chart 1.16 Broad money and nominal GDP (a) Recessions are defined as at least two consecutive quarters of falling output (at constant market prices) estimated using the latest data. Recessions are assumed to end once output began to rise. (b) The series is constructed using M4 growth prior to 1998 Q4, and growth in M4 excluding intermediate OFCs thereafter. For the definition of intermediate OFCs, see footnote (a) in Table 1.C. (c) At current market prices. The latest observation is 2009 Q4.

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Conclusions The Banking system in the West needs another three years to stabilise its balance sheets. The availability of Bank finance will continue to be limited. The USA will experience double-dip from November. Next year its GDP will shrink by 1% The UK will experience double-dip from March 2011, shrinking by 1% Europe will also contract next year, the south by more than the north, on average 1.5% Interest Rates: central bank rates, no change but market rates, will drift upwards. Inflation: this will not be a problem, deflation is more likely. Property prices in the West will fall by another 10%.

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The Central Spending Review The NHS budget is not really protected. The internal rate of health care inflation is around 6%, the Treasury will allow a 1.15% yoy increase in real terms, but this uses their inflation figure of 2.25%. In effect the NHS will have to ‘find’ around 3.3Bn each year of cost saving over the next 4 years. This out of a total budget of £110 Bn. I would expect the NHS to look to their suppliers to increase the value they offer, with more for less. I would expect too, that internal processes could be made more cost effective. Expect at least 5 years of relative austerity.